working capital<\/a> needed to grow and thrive in their respective industries.<\/span><\/p>\nExample of asset-based lending<\/h3>\n
XYZ Manufacturing is a mid-sized company specialising in producing custom machinery. It has a diverse range of assets, including accounts receivable and inventory.<\/span><\/p>\nThe company needs additional capital to fund a new product line and improve working capital.<\/p>\n
\n- Asset Evaluation:<\/strong>\n
\n- The company’s assets, particularly accounts receivable and inventory, are evaluated. Let’s say XYZ has N$500,000 in accounts receivable and N$700,000 in inventory.<\/li>\n<\/ul>\n<\/li>\n
- Asset-based lending agreement:<\/strong>\n
\n- XYZ enters into an asset-based lending agreement with a financial institution. The lender agrees to provide a revolving line of credit based on a percentage of the assessed value of the company’s accounts receivable and inventory.<\/li>\n<\/ul>\n<\/li>\n
- Loan amount calculation:<\/strong>\n
\n- The lender may offer, for example, 80% of the value of accounts receivable and 50% of the value of inventory. The maximum loan amount would be calculated as follows:
\nLoan amount = N$400,000 = N$350,000 = N$750,000<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n- Repayment:<\/strong>\n
\n- The loan is a revolving line of credit, and as XYZ receives payments from customers or sells inventory, it can repay the borrowed amount. Interest is charged only on the outstanding balance.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n","protected":false},"author":1,"template":"","class_list":["post-37826","business-glossary","type-business-glossary","status-publish","hentry"],"acf":[],"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_blog_full":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"
Definition Asset-based lending is a form of business financing where a company secures a loan or line of credit using its assets as collateral. Unlike traditional loans that primarily rely on creditworthiness, asset-based lending is based on the value of the company’s assets, such as accounts receivable, inventory, equipment, and real estate. What is asset-based lending? Here are the key components and points about asset-based lending: Collateral-centred: Asset-based lending centres on the value of a company’s assets. Lenders evaluate their quality, liquidity, and marketability to determine the funding amount. Types of collateral: Accounts receivable: Unpaid invoices from customers are considered…<\/p>\n","category_list_v2":"","author_info_v2":{"name":"root","url":"https:\/\/swoopfunding.com\/na\/author\/root\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/na\/wp-json\/wp\/v2\/business-glossary\/37826","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/na\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/na\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/na\/wp-json\/wp\/v2\/users\/1"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/na\/wp-json\/wp\/v2\/media?parent=37826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}